Scotland to weather the crunch

Scotland's calmer housing market will help its economy to bear up relatively well in the face of the credit crunch over the next two years, the Ernst and Young Item Club predicts today.

Economic growth north of the border will slow to a below-average 1.5 per cent this year, and 1.6 per cent in 2009, as Scotland is hit by the same headwinds as the rest of the UK, Item predicts in its quarterly survey.

But because Scotland's housing boom has not been so frenzied, prices now look less overvalued relative to local wages than in the rest of the UK, and that should help to contain the risk of a sharper downturn.

While he expects up to 15,000 jobs to be lost in the vulnerable services sector between now and 2009, as weaker consumer spending and the turmoil in the key banking industry take their toll, continued immigration should help to maintain overall employment.